Article ID: | iaor20001946 |
Country: | Netherlands |
Volume: | 116 |
Issue: | 2 |
Start Page Number: | 319 |
End Page Number: | 330 |
Publication Date: | Jul 1999 |
Journal: | European Journal of Operational Research |
Authors: | Pfeiffer Thomas |
Keywords: | programming: mathematical |
This paper presents the use of a transfer pricing system to coordinate business units in a Wagner–Whitin type model for a decentralized lot-sizing problem in a dynamic multistage, multiproduct environment. The paper includes two major proofs: (1) a transfer pricing system enabling optimal decentralized lot-sizing is characterized. The transfer pricing system can be interpreted as a generalization of the reciprocal method or step-down allocation method in cost location accounting; and (2) based on a Wagner–Whitin type theorem and the Kakutani fixed point theorem, it is shown that such a transfer pricing system exists.